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Australia’s Energy Minister Martin Ferguson has slapped down the government’s chief climate change adviser, Ross Garnaut, flatly rejecting calls for more regulation on electricity markets and warning that mandatory renewable energy targets are pushing up power prices.

Mr Ferguson rejected Professor Garnaut’s claims that electricity price rises were a result of “gouging” by electricity generators.

The senior cabinet minister said electricity prices had risen because of costs in replacing ageing plants and he warned that prices would rise by 30per cent in the next three years because of investment costs, a carbon price and the mandatory target for renewable energy generation.

Mr Ferguson and the Australian Energy Market Commission both warned that the government’s compulsory target of 20 per cent electricity generation from renewable sources by 2020 was coming at a “cost to the community” and could “challenge” the national electricity grid.

Professor Garnaut this week recommended coal-fired power electricity generators not be compensated for a carbon tax and that a new energy regulator be formed.

At an energy conference in Melbourne yesterday, Mr Ferguson said Professor Garnaut had a role in advising the multi-party climate change committee, which includes the Greens, but he “does not speak for the government, nor for the Ministerial Council on Energy”, which represents every government.

Mr Ferguson’s comments come as the Labor government fights with the Greens over “extreme” policies.

It has also indicated that compensation for industries for a carbon tax will be the same as that offered in 2009, a policy the Greens voted against on the grounds it was too generous.

Mr Ferguson said: “The regulatory framework for Australia’s energy sector is leading edge, and as such the Ministerial Council on Energy and the energy market bodies often review different aspects of our regulatory environment to ensure it delivers optimal outcomes for the community.

“Residential electricity prices have increased by about 40 per cent over the last three years and are forecast to increase in the order of 30 per cent in the three years to June 2013. As those who study these issues will know, there is no quick fix to rising prices.

“Prices reflect the cost of investment to maintain and replace ageing assets to ensure the community gets the reliability it has come to expect. We must ensure investment occurs to reduce emissions and meet demand, while importantly, maintaining sufficient competition and avoiding concentration in the sector.”

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